Friday, February 16, 2007

Insurance is a financial product where you pay a premium or series of premiums. In return, if a particular event happens you will be compensated financially. Except for life assurance, most insurance is annually renewable. This means that the insurer can change both the premium and the benefits each time, or may even decide to no longer offer insurance to you.Insurers call this general insurance to differentiate it from life assurance.

What is life assurance?

Life assurance is the term used when you insure your own or someone else's life. Strictly, assurance is policies that you will be paid out on such as endowments and whole-of-life policies, but you can use it for any type of life protection.Life assurance is a bit different to most insurance - most policies last many years rather than having to be renewed each year. And "indemnity rules", whereby you cannot get back more than you have lost, do not apply.

Do you have to have insurance?

If you have a car or motor bike, the law requires you to have insurance, although it is only interested in making sure that others are protected from what you might do, rather than on you losing money by say damaging your car in an accident.If you have a mortgage, your lender will usually make it a condition of the loan that you have adequate insurance for your home in order to protect itself.Other than that, most insurance is optional.

Do you need insurance?

If you insure yourself against every eventuality, it will probably cost more than you earn. Plan carefully and only take out what you really believe you will need Priorities. That means:-Thinking about where you might be vulnerable,-What the risk might be of that happening,-How else you could cope with the problem-How best to insure against the risk.

Tip

Draw up a list of everything you own and what it is worth. Then add on what would happen if certain disasters struck - such as becoming disabled or unemployed. If you can afford not to worry about the financial loss, then you probably do not need insurance for it.